When it comes to personal finance, what you don’t know can hurt you. Studies show that teaching kids about money is more than simply showing them how to budget and save — it also helps them “understand the positive and negative meanings of money.”
So how do we teach children about money in a positive and meaningful way? Here are some suggestions:
Give an allowance.
According to a recent poll by creditcards.com, only 40 percent of children under 18 receive an allowance. Receiving an allowance is one of the best ways to teach children about money management. It’s a tool to help them learn to budget, prioritize their spending and learn to save. Although many parents give $1 per week per year of age, there is no “right” amount to give your child as it depends on family income, a child’s activities and how much financial responsibility you want your child to take on. Many experts say that an allowance should not be tied to chores, as certain domestic tasks are non-negotiable and should not be tied to earning money.
Teach your child to save, give and spend.
According to Ron Lieber, finance columnist, it’s important to teach kids how to divvy up their money. He recommends that kids use three jars labeled “give”, “spend” and “save” and that they divide their allowance between the three. Of course, kids are bound to make mistakes, but it’s best to experiment and learn in the safety of their home, under their parents’ supervision. The stakes are simply not as high.
Include kids in your bill-paying process.
Understanding monthly costs is a critical component of becoming educated about money. Show them what a bill looks like, what types of products and services you pay for, and how you budget for it.
Talk to your kids about your expenses.
Often, parents exclude their kids from any conversation about money. Experts agree that talking to your children about what goods and services cost, especially things they use every day like cable and internet, will help them understand what is free and what is paid. So the next time you rent a movie or go online, let them know how much it costs.
Another great personal finance lesson is that big service providers should never take advantage of their customers. Billshark never lets you overpay on your monthly bills. Just send them to us and we’ll lower them in minutes.